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Tech & Processes

May 02, 2024

7 mins read

What’s the Point: The battle with erroneous transfers

by Emmanuel Paul

Erroneous transfers .jpeg

Have you ever sent money to the wrong person or account? We’ve all been there, and so have millions of people globally. It could be completely innocent, like that time I mistakenly sent airtime to a stranger who ended up praying for me. Or it could be serious, like a deal gone wrong with an Instagram vendor or the WhatsApp group admin for a Ponzi scheme. 

In this entry for What’s The Point, we’ll explore erroneous transfers. We talked to Grace, Dolor, and Goodness from our legal, fraud and transaction monitoring teams to figure out why it happens, what we can do when it happens, and why the solution works the way it does. 

I gave up on trying to make the headline rhyme like "What’s the point of the battle with erroneous transfers", so I resolved to give you insights that will make you forget the lack of a poetic title. Back to the issue at hand. Here’s how we’ll structure the story to learn: 

  1. What erroneous transfers mean and the forms they take

  2. What the regulations say about resolving erroneous transfers

  3. How it compares with other global financial institutions

  4. Why it’s so hard to resolve 

  5. What we do and can still do about it. 

The many faces of erroneous bank transfers

Wrong transfer face.jpeg

Erroneous transfers or accidental bank transfers refer to any movement of funds caused by mistake, fraud, or other unintended circumstances. You could call them accidental, mistaken, misdirected, or unauthorised transfers. The examples in my introduction allude to the different forms of erroneous transfers. It’s a typical headache for individuals and businesses. 

In their purest form, erroneous transfers involve innocent customer or bank teller errors, such as typing the wrong bank account number, selecting the wrong recipient from the saved beneficiary, or typing/writing 10,000 instead of 1,000. Now, it extends beyond that. It can also include:

  • Unauthorised access: A friend or fiend could gain access to your account and send money without your permission. 

  • Business gone bad: You could send money to someone under deceptive circumstances. It could be an online vendor that doesn’t exist or an outright fraudster.

  • Fraudulent senders: This is the reverse, where senders claim a legitimate transaction was done in error.

  • Technical glitches: Customers could get debited twice for the same transaction.

  • Subscription blues: You could forget to cancel a subscription and get hit with a shocking debit. 

  • Currency fluctuations: This could cause you to send the wrong amount when sending money from one country to another. 

Individuals and businesses face these issues when sending money today, but it has been a long time coming. 

Before the digital age, transfer errors with checks, passbooks, and tellers. Technology has given us more places to buy from and seamless tools to make payments, increasing the chances of errors. You’ll see these issues on either side of the pond.  A survey by the UK-based payments firm VibePay, showed that 25% of UK banking customers had misdirected funds at one point, which has led to customers losing £204 million. 

In 2023, US consumers lost $392 million to online shopping gone wrong and $2.6 billion by sending money to people pretending to be who they’re not. 

How regulations resolve erroneous transfers

Two main bodies help police financial issues like this in Nigeria: the judiciary (courts) and the Central Bank of Nigeria (CBN). The CBN provides rules under which every financial institution operates. However, like in most democracies, the courts have the final say whenever there's a dispute. 

The Central Bank of Nigeria’s “Regulation On Instant (Inter-Bank) Electronic Funds Transfer Services In Nigeria 2018” shows how erroneous transfers should be handled. If the bank makes an error, internal processes will be used to rectify the issue. When customers make a mistake, that’s where things get interesting. The CBN recommends the following steps:

  1. The customer reaches out to the person they mistakenly sent the money to directly and arranges for an amicable refund. 

  2. If the person doesn’t respond, the customer should contact their bank. The customer’s bank should then inform the recipient‘s bank of the issue. Then, the recipient bank can place a Post No Debit (PND) on the account while obtaining consent from the recipient. 

  3. If the bank still can’t obtain consent, the Internal auditors of both banks have to meet to resolve the issue. 

Building on the CBN’s framework, the customer might have to get a court order to reverse the funds if the recipient can't be reached. In most Nigerian states, funds below N5 million (or N10 million in Lagos) can be retrieved with a court order from a Magistrates’ Court. Amounts above this would require the High Court of Justice. 

I know that this sounds like a lot, but there are a few reasons why it exists. Between protecting your rights as a customer, the rights of the business owner, and those of the banking institutions (yes, they have rights, too), a few checks have to be in place. Here are some important facts to note: 

  • Customer rights: Banks do not have the right to touch customers' money without consent. The banks could be sued if a reversal is made without a court order.

  • Timing is important: It’s very critical to report the transactions immediately they happen. When a court order is needed, it should be done as quickly as possible, as PNDs only last for 72 hours.

  • Banks need to investigate: The recipient bank needs to find out if it was indeed an erroneous transaction or if a transaction was completed. If the recipient provides evidence that the money was for a transaction, 

If you’re still not convinced, it also works similarly elsewhere in the world. In the US, the Electronic Funds Transfer Act, Reg E, treats the customer’s error claim as alleged until the bank completes its investigation and reviews the provided required documentation. Similarly, the Financial Conduct Authority in the UK has the Payments Service Regulations that mandate banks to reverse money only if an error has been confirmed. 

What customers need to prevent

Wrong transfer face 2.jpeg

The data shows that people are losing millions to imposters and fraudulent online shopping. Issues with erroneous transfers in Nigeria demand that customers balance speed and attention to detail, depending on the context.  

Emails with suspicious messages and links can give fraudsters the tools they need to impersonate consumers. But these are becoming more obvious. What’s not obvious are social media trends that ask users to provide their account details or other deeply personal information. 

How Moniepoint manages erroneous transfers

Moniepoint handles erroneous transfers by being as fair, flexible, and strict with regulations as possible. When we get a report, here’s what we do;

  1. We try to be as transparent as possible by copying the other party in the mail to make sure that an erroneous transfer actually happened. In this case, we can determine if this was a case of fraud and pay extra attention to it. 

  2. We go even further with business owners by including their relationship managers and their phone numbers for direct contact. We ask for consent to debit the funds if it was an error or evidence of value delivered, which we then review. 

  3. Most importantly, we pay attention to the possibility of forged documents, from receipts to court orders. This is critical for court orders, as some people might forge and print what seems to be a court order with no legal backing, 

  4. Sometimes, we contact the relevant legal authorities to ensure we have valid documents. We keep building our systems to ensure the highest security and transparency in different instances. You can read more about our work with security and biometrics here

So there you have it. Erroneous transfers are a thing globally. People lose money, and regulatory bodies across the globe try to strike a balance to protect consumers and everyone else in the financial system. It’s still a work in progress, and we’re committed to playing our part.

If you’d like to join us as we protect the financial happiness of Africans globally, click here to find a role that suits you.

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